Aon consultant warns that standard business interruption policies will not cover foot and mouth disease related losses

Vivienne Hexter, technical standards consultant at Aon, has commented on the insurance implications of foot and mouth disease (FMD).

Hexter said: "There is very little insurance protection for loss following an occurrence of foot and mouth disease, besides specific FMD cover for farmers and event insurance.”

She adds: "Standard UK consequential loss cover operates by virtue of interruption due to damage to insured property. As FMD is not an insured peril and livestock is a normal exclusion, the usual business interruption (BI) policy would not cover FMD related losses. Even a contagious disease extension would only cover loss following closure of premises due to an occurrence of a "human" notifiable disease."

So can additional BI extensions help? According to Aon:

Contagious disease extension

Such extensions usually provide consequential loss following closure of premises due to an occurrence of a "human" notifiable disease only. As FMD does not fall into this category it is unlikely that this extension will respond.

Denial of access (damage) / Loss of attraction extensions

Both extensions provide a broader BI cover than is standard. Despite the varying cover clauses available, cover tends to be triggered by damage only and consequently would provide no protection against FMD.

Non-damage denial of access extension

Typically such extensions respond to denial of access from restrictions imposed by the authorities. Specific wordings differ but disease or hazards to health are often expressly excluded. Where this is the case, the policy would provide no cover relating to FMD.

Abandonment/cancellation cover for exhibitions, sporting events and concerts

Insurance is available to provide protection against costs incurred as a result of cancellation, abandonment, postponement or curtailment of an event due to circumstances beyond the control of the organiser/principal. Additional cover for loss of profits may also be available, for example, in respect of advance ticket sales or failure of television transmission.

Exposures

Examples of possible impact include:

The loss of production and loss of access to farms including the time taken to re-stock and regain production. Arable farmers may suffer consequential loss due to inability to move product/machinery. Any farm shops in affected areas will be closed.

Consequential loss due to cancellation of transits and restriction of access.

Consequential loss due to lack of supplies in both the wholesale and retail butchery trades.

Denial of access imposed by authorities or loss of tourist attraction. Animal parks and open farms may have to close completely.

Loss of business suffered by shops, pubs, restaurants, petrol stations and any other retailers in the affected areas due to either denial of access or loss of attraction.

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